Designers Offer Advice on Managing Cash Flow

Kitchen & Bath Design News recently posed the question to dealers and designers in the kitchen and bath industry: “What are the best ways to monitor and manage cash flow within your firm?” Following are some of their responses:

“A daily check on job progress, job deposits and final payments is imperative to managing cash flow. At times I use a retainer and, if not, a 50% deposit upon signing a contract. I use QuickBooks software to monitor cash flow. It ties into 20/20 technology. It’s almost mandatory to have it.

With cash flow, deposits are king. Part of monitoring cash flow is monitoring the progress of the jobs – where they are and where you are in terms of the next payment. I do a daily check on where we are, what jobs are in the design stage, what jobs are ready to be signed, what jobs are in progress and what jobs are due to be completed. It’s a basic of the business. As the old saying goes, watch the pennies and the dollars will take care of themselves.”

Michael Fonseca, president
Brooklyn, NY

“The whole bottom line about managing cash flow is you have to protect it all of the time. So we’re scrutinizing every penny we spend, especially right now. All of our contracts are paid upon a 50/40/10 schedule, and we use the NKBA contract. We’re tight with our payment schedules because we have to be. Clients have to pay within their terms.

We’ve always used QuickBooks to keep track of the cash flow. We looked at several other programs a few years ago, but most people we were dealing with knew it, so it’s what we chose.

We’re trying to discount everything we can right now. The only other thing we’re doing is cutting back on everything, except advertising. The idea is to minimize expenditure, but maximize what you get out of every expenditure.”

Pete Stone, owner
Stone Kitchens
Louisville, KY

“We’re in California, and because of the contractor’s license laws that we’re monitored and governed under, the best way [to monitor and manage cash flow] is to make sure payments are done in a timely manner at different levels as the job progresses. That way, we’re never behind, nor is the customer ever too far ahead of us, either.

We use QuickBooks as an accounting program, and we also use a job package that goes along with it in order to track costs. We don’t worry as much about cash flow. QuickBooks isn’t user-friendly in my mind, but it’s the most popular and well known. As an overall job-costing package, it has some limitations, but we work around it. Everything is on a spreadsheet and QuickBooks is tied to it. As costing goes in, we track it on an ongoing basis every time we get a bill. Any monies we receive throughout go into the customer deposit account. At the end, we take the money out. It’s pretty simple. It’s like a payment schedule. Everything I do goes on a contract and we schedule payments at different intervals.”

Jim Flaherty, president
Better Kitchens & Baths
Ventura, CA

“You have to project out your leads and jobs, and that will project your incoming cash flow. With outgoing cash flow, you need to keep vendors and unpaid bills detailed and up-to-date and pay them accordingly.

We have a strict tracking system with regard to our leads and where they’re coming from. As we sell the job, we have projected dates of when the job is going to take place. We’ll be able to manage and monitor when those progress payments, deposits or final payments are coming in so we can cover bills, payroll and overhead accordingly.

We also have a spreadsheet program to estimate our jobs. It gives us a good idea as to the cost and mark-up in the margins and everything we need to do in order to be profitable. QuickBooks also helps us to manage invoices and lets us know what we should be looking out for.

With the economy being the way it is, managing and monitoring cash flow is definitely a priority for any business because you don’t know what’s coming in the door at any given time. Our livelihood is from our leads, sold jobs and close ratios on those jobs. Leads should be qualified as they come in the door, so you’re not spending valuable labor hours on a lead that’s not going to go anywhere. It’s not only selling the job, it’s managing the cash flow as jobs are going along. It really starts when the customer walks in the door.”

Rebecca Johnston, general manager
DreamMaker Bath & Kitchen
Williston, VT

“We have an internal accounting system on the computer to manage cash flow. We project out all of our payables by the week on everything we’ve purchased. As far as receivables go, 70% of our business is remodeling. On a remodeling contract, we get a deposit and a percentage when we deliver the cabinets. We get another percentage when the countertops are delivered. The final payment is after the whole job is complete. So our cash flow is moving right along as the job progresses.

We’ve always taken advantage of all cash discounts, as well, so you have a line of credit to fall back on if you need to because of the cost involved with larger projects. If you don’t take advantage of the manufacturers that are willing to give you a cash discount, it is basically money you’re throwing away. It will definitely work to your benefit in the long run.”

Keith Helfrich, president
Kitchens By Design
Allentown, PA